Correlation Between Riocan REIT and Seritage Growth

Can any of the company-specific risk be diversified away by investing in both Riocan REIT and Seritage Growth at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Riocan REIT and Seritage Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Riocan REIT and Seritage Growth Properties, you can compare the effects of market volatilities on Riocan REIT and Seritage Growth and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Riocan REIT with a short position of Seritage Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Riocan REIT and Seritage Growth.

Diversification Opportunities for Riocan REIT and Seritage Growth

0.49

Correlation Coefficient

Riocan REIT  Seritage Growth

Very weak diversification

The 3 months correlation between Riocan and Seritage is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Riocan REIT and Seritage Growth Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seritage Growth Prop and Riocan REIT is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Riocan REIT are associated (or correlated) with Seritage Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seritage Growth Prop has no effect on the direction of Riocan REIT i.e., Riocan REIT and Seritage Growth go up and down completely randomly.

Pair Corralation between Riocan REIT and Seritage Growth

Assuming the 90 days horizon Riocan REIT is expected to under-perform the Seritage Growth. But the pink sheet apears to be less risky and, when comparing its historical volatility, Riocan REIT is 1.66 times less risky than Seritage Growth. The pink sheet trades about -0.17 of its potential returns per unit of risk. The Seritage Growth Properties is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  453.00  in Seritage Growth Properties on September 14, 2024 and sell it today you would lose (24.00) from holding Seritage Growth Properties or give up 5.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Riocan REIT  vs.  Seritage Growth Properties

Riocan REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Riocan REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Seritage Growth Prop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seritage Growth Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Seritage Growth is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Riocan REIT and Seritage Growth

The main advantage of trading using opposite Riocan REIT and Seritage Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Riocan REIT position performs unexpectedly, Seritage Growth can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Seritage Growth will offset losses from the drop in Seritage Growth's long position.

The idea behind Riocan REIT and Seritage Growth Properties pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.